Wednesday, August 29, 2018

Stub 3.8: The Day Labor Market

Raymond only called one expert, Mark Wherrett.

Mark was a labor expediter in the greater Los Angeles metropolitan region.

“Tell us, Mr. Wherrett, about your credentials.” Raymond said.

“I have a Masters in Science from University of California, Riverside in the field of Business Administration. My major area of study was in Operations with a specialty in selecting metrics for Management by Objectives.” Mr Wherrett said.

Ideka Nuffin made a rude noise upon hearing that Rojas’s expert only had a Master’s degree. In her mind Rojas was significantly undergunned and she intended to make him pay.

“Tell me Mr Wherrett, do you work in academia?” Raymond asked.

“No sir. I do not.” Wherrett said.

“What do you do to put bread on the table?” Raymond asked.

“I am a labor expediter. I anticipate differences in the daily rate across the LA metropolitan region. I hire workers in low cost areas, bus them to areas where day labor is more expensive and re-auction their ‘contract’. Then, at the end of the day I bus the workers back home.” Wherrett said.

“Would you say that you are an expert on the labor market in the LA area?” Raymond asked.

“I would say that I am an expert on the day labor market in the LA area. Yes I would.” Wherrett agreed.

“We had a conversation earlier where you told me that you thought Sedelia should use the median day labor rate as the sole metric for managing money supply. Please share your reasoning with this committee.” Raymond smiled encouragingly at the expert.

“The first requirement of a good business metric is that it has to be BIG. And far more people in Sedelia are involved in the day labor market than any other segment.

“A good metric has to be big because small metrics have minimal impact on outcomes. I had a professor who like to say ‘Counting paperclips is not the path to profitability.’ Furthermore, big metrics tend to have inertia and have a better signal-to-noise ratio.” Looking at the audience Wherrett realized that he had lost them. “Let me say that another way. Big metrics don’t shimmy in the wind. It takes meaningful changes in the business operation or the economy to move them.”

“The other important part of a good metric is that it be highly connected to other meaningful metrics. The rare earths used in integrated circuits are crucial to Sedelia’s economy but they are many, many steps removed from the day-to-day operations of most other parts of the economy.” Wherrett said. “The day labor market is no more than three steps removed from over 95% of the Sedelia economy. It is the hub that all the other spokes radiate from. The price of day labor in Fresno and Bakersfield is coupled to the price of labor in LA.”

“Is it difficult to monitor the price of day labor in LA?” Raymond asked.

“Nope, not at all. Labor-Bay is the largest platform that auctions off work. There are other sites but Labor-Bay is by far the largest and most mature. The Labor-Bay site features pull-down tabs that list all kinds of metrics, including number of people who found jobs in the last 24 hours and the median day-wage.” Wherrett said. “Obviously I have that page bookmarked but finding it is as easy as typing a few key words into a search engine.”

“What is the current price of labor?” Raymond asked.

Wherrett pulled his smartphone from his pocket and pressed a few buttons. “As of the last 24 hours the median 8 hour contract went for $8.47 in Sedelia dollars.” Wherrett said.

“What is your gut feel for the median wages if we were experiencing a booming economy?” Raymond asked.

This question made Wherrett uncomfortable and caused him to dance around a little bit. “There are a lot of ways to interpret that question. I don’t want to misinterpret your question give you bad information.” Wherrett said.

Raymond tried again. “Suppose you had the ability to expand or shrink the money supply. Given the state of the Sedelia economy right now, what would you propose as the target day labor rate to jumpstart the economy.”

The way Raymond had posed the problem left Wherrett very little wiggle room. “I suppose I would aim to inflate the economy by increasing the money supply until the median day labor rate for the LA market was an even $10 a day.” Wherrett said.

“Why $10?” Raymond asked. “Isn’t that inflationary?”

“It is because I like round numbers. And it is not inflationary if the increased workforce demonstrates more than a 20% increase in productivity.” Wherrett said. "Besides, you are using an old definition of 'inflation'.  Inflation is not the growth in nominal money, it is the loss in purchasing power."

Raymond said, “I have no further questions and started to sit down when his BAHA buzzed him. He stood back up. “Another question occurred to me.”

“If you could change one thing in Sedelia, what would it be?” Raymond asked Wherrett.

“I would eliminate all records keeping and all taxes withheld on day labor.” Wherrett said.

“Why?” Raymond asked.

“Because the burden of collecting and keeping records is the equivalent of a 40% decrease in productivity. Also, the burden of collecting and keeping records discourages people from starting businesses. They may know everything about working concrete or driving cabs or making pizzas but they are petrified by the fear of having all of their assets taken by the State and being thrown in prison.” Wherrett said. “You need to tell prospective business owners that isn’t going to happen before you can create significantly more demand for labor.”

Nuffin hollered “Bullshit!”

Raymond looked around at Nuffin and said, “I beg your pardon?”

Nuffin said, in a more conversational voice, “I said ‘Bullshit!’. It ain’t gonna happen. Workers need protections from the employers who want to exploit them.”

“How are the employers going to exploit them?” Raymond asked, genuinely curious.

“Well, for one thing they are gonna squeeze work out of them and then not pay them. For another thing, they are not going to give them breaks or will have them do back-breaking, dangerous work.” Nuffin said.

Wherrett interjected, “We are talking about the day labor market. The employer pays the worker at the end of the work day. Every day. The most the employer will screw the worker out of is 8 hours pay. And then there are the reviews.”

“What are you talking about, ‘reviews’?” Nuffin scoffed.

“It is easier to give you an example and show you than to explain. Give me your address.” Raymond commanded.

Raymond typed the address into an app. In half a second he was telling Nuffin, "You have three brew pubs within two blocks of the address you gave me. The Bloated Goat has the highest rated brews, on average but the Red Dog Inn has the best IPA by far and the Toe-Maine Tavern has the best food. I can tell you the price of any drink in any of those three establishments. I can tell you the average customer review. I can tell you the size of the drinks and, in most cases, I can tell you the temperature they are served at.”

“It is the same thing in the labor market. Whether an employer likes it or not, many of his workers post reviews on various apps. Bad bosses won’t stay in business long because they won’t be able to find workers who are willing to work for them.” Raymond said.

Nuffin said slyly, “You are an employer. Are there on-line reviews about you?”

“There are. The last time I looked there were about fifty. Some good. Some bad. You have to look at the picture they paint in total.” Raymond said. “You also have to discard the very worst reviews. Unfortunately, there are some workers to try to extort the employers by threatening to write bad reviews. That is just the reality of being an employer.”

Next Installment

1 comment:

  1. VEry well done! And yes, labor markets DO set market rate on their own.


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